Economist: Think small with biofuel crops

Stop thinking big, and start thinking small. As strange as it may sound, one economist says this is the best strategy for U.S. farmers, especially Alabama farmers, to move further down the road toward energy self-sufficiency.

Simply put, the best biofuel crop opportunities may be on a small scale — make that very small scale, says Robert Goodman, an Alabama Cooperative Extension System economist and Auburn University associate professor of agricultural economics.

The hard facts are these: Many of the crops most people perceive as ultimate sources of biofuels — corn and biomass sources, such as forest products and switchgrass —comprise only part of a much bigger picture.

One other hard reality is that Americans consume more than 320 million gallons of gasoline a day, and there’s not a biofuel crop on the planet that will replace that gasoline anytime soon, Goodman says. Yes, corn is a viable ethanol source that has been proven time and time again. But even under the most ideal conditions, it would take an additional 400 million acres of corn to produce the ethanol required to replace the gasoline currently consumed annually — basically, all the open land currently available in the United States, including pastureland, he says.

“At the margins, we’re going to use this stuff,” says Goodman. “It’s going to ease our dependence but it’s not going to be a panacea based on the technologies we have available now.

“And it’s not going to be free or even cheap.”

Because of the self-limiting factors associated with corn, many entrepreneurs are pinning their hopes on so-called biomass (or cellulosic) ethanol sources, such as forestry products, switchgrass and agricultural waste products. They could figure prominently in America’s energy future, Goodman says.

But for now, a host of challenges remain, such as finding a commercially viable way to breakdown the cellulose in these biomass sources so that ethanol production can occur. Scientists know how to do this, only it hasn’t been done on a large scale.

Researchers stress they have every reason to believe that some profitable way will be found to produce biomass ethanol on a large scale. But for now, the search continues.

That’s one reason why Goodman, speaking at a meeting of the Capital City Kiwanis Club in Montgomery, advised farmers to take small steps instead of big steps — to think what can be done here and now rather than years or decades down the road.

Goodman thinks a good bet for now is making biodiesel on a small scale — no panacea, mind you, just a good short-term strategy.

“We will never be energy self-sufficient with biodiesel,” he says, “but we can go a long way with it.”

In fact, he believes that four crops easily grown in Alabama are especially well-suited as biodiesel sources.

One of them is canola, also known as rapeseed.

“We can do a really good job with canola, a winter crop and a beautiful one.”

One especially appealing factor associated with canola is that it could be grown in winter, much like wheat, so that farmers would be freed up in the summer to raise other crops, he says.

Goodman also foresees a “tremendous potential” for a crop once grown in abundance in Alabama — soybeans, a prime source of biodiesel.

“We once grew 1.7 million acres of soybeans in Alabama,” he says. “Now we grow only about 200,000 acres. The opportunity is there.”

Peanuts are another lucrative biodiesel source, Goodman says.

“Forty percent of it is oil. That’s a lot of oil that could be squeezed to burn in tractors.”

The problem now is that peanuts, currently priced at about $350 a ton, are too expensive to use as a feedstock, Goodman says.

On the other hand, there are low-quality peanuts, known in the business as seg 2 and 3 peanuts, which have traditionally worked to depress the overall price of peanuts. Why not press them instead — into oil that eventually could be processed into biodiesel? Goodman asks.

He estimates a ton of seg 3’s would yield about 100 gallons of biodiesel worth more than $200 and more than 1,000 pounds of meal worth more than $100 — “$300 without even trying,” Goodman says.

A similar approach could work with cottonseed, he says.

“There is a pile of cottonseed in every gin in Alabama,” Goodman says. “So why can’t we have a mill for extracting oil, which would be worth about 40 cents a pound.”

Goodman says producers interested in these biofuel crops should follow the same strategy as swine producers.

“In swine production you jump in and jump out depending on market conditions,” Goodman says.

That’s precisely how biofuel crop products should act — find the niches of opportunity and jump in when profit beckons. Likewise, jump out when prices begin to sag and better opportunities are available.

The general rule in agriculture is that profit margins are small and prices change rapidly, Goodman says — the reason why he believes that small-scale biodiesel plants would be especially well suited to farmers.

For this to work, though, plant costs would have to be kept low, he says.